Disclaimers
This document has been prepared solely for the purpose of providing U.K. and Dutch
investors with certain information under Article 23 of the European Alternative
Investment Fund Managers Directive (European Directive 2011/61/EU) (the “AIFMD”) as
implemented in their respective jurisdictions. Accordingly, you should not use thisdocument for any other purpose.
Prohibition of Sales to EEA Retail Investors
In addition to the restrictions under the AIFMD, the units of Japan Hotel REIT Investment
Corporation (“JHR” or the “AIF”) are not intended to be offered, sold or otherwise madeavailable to and should not be offered, sold or otherwise made available to any retailinvestor in the European Economic Area, or the EEA. For these purposes, a retail investor
means a person who is one (or more) of: (i) a retail client as defined in point (11) of
Article 4(1) of Directive 2014/65/EU, as amended, or the MiFID II; or (ii) a customer
within the meaning of Directive (EU) 2016/97, where that customer would not qualify as aprofessional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not aqualified investor as defined in Regulation (EU) 2017/1129, as amended, the Prospectus
Regulation. Consequently no key information document required by Regulation (EU) No
1286/2014, or the PRIIPs Regulation, for offering or selling the units of JHR or otherwise
making them available to retail investors in the EEA has been prepared and therefore
offering or selling the units of JHR, or otherwise making them available, to any retailinvestor in the EEA may be unlawful under the PRIIPs Regulation.
United Kingdom
The units of JHR are being marketed in the United Kingdom pursuant to Article 59 of theUnited Kingdom Alternative Investment Fund Managers Regulations 2013. In accordancewith this provision, Japan Hotel REIT Advisors Co., Ltd. (the “AIFM”) has notified the
Financial Conduct Authority (the “FCA”) of its intention to offer these units in the United
Kingdom. For the purposes of the United Kingdom Financial Services and Markets Act
2000 (“FSMA”) JHR is an unregulated collective investment scheme which has not beenauthorized by the FCA. Accordingly, any communications of an invitation or inducement
to invest in JHR may be made only to: (i) investment professionals falling within Article
19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005,
as amended, or the Order; (ii) high net worth companies unincorporated associations orother entities falling within Articles 49(2)(a) to (d) of the Order; or (iii) other persons towhom it may lawfully be communicated, (all such persons together being referred to as“Relevant Persons”). In the United Kingdom, this document and its contents are directed
only at Relevant Persons and must not be acted on or relied on by persons who are not
Relevant Persons. Any person who is not a Relevant Person may not act or rely on thisdocument or any of its contents. The transmission of this document and its contents in the
United Kingdom to any person other than a Relevant Person is unauthorized and may
contravene the FSMA and other United Kingdom securities laws and regulations.
European Economic Area Investors
The AIFMD was adopted on June 8, 2011 and was required to be implemented by each
Member State of the EEA into its national legislation by July 22, 2013. The units of JHR
may not be marketed (within the meaning given to the term “marketing” under the
AIFMD), and the Communication may not be conducted, to prospective investors
domiciled or with a registered office in any Member State of the EEA unless: (i) the unitsof JHR may be marketed under any national private placement regime (including underthe AIFMD) or other exemption in that Member State; or (ii) the units of JHR canotherwise be lawfully marketed or sold in that Member State in circumstances in which
the AIFMD does not apply, provided that any such offer or sale is not made to a retailinvestor as described above. We have made a notification to each of the Netherlands
Authority for the Financial Markets and the United Kingdom Financial Conduct Authority
pursuant to Article 42 of the AIFMD in order to market the units of JHR in the
Netherlands and the United Kingdom, respectively.
Netherlands
The units of JHR are being marketed in the Netherlands under Section 1:13b of the Dutch
Financial Supervision Act (Wet op het financieel toezicht, or the “Wft”). In accordancewith this provision, the AIFM has notified the Dutch Authority for the Financial Markets
of its intention to offer these units in the Netherlands. The units of JHR will not, directly
or indirectly, be offered, sold, transferred or delivered in the Netherlands, except to or byindividuals or entities that are qualified investors (gekwalificeerde beleggers) within themeaning of Article 1:1 of the Wft, and as a consequence neither the AIFM nor JHR is
subject to the license requirement pursuant to the Wft. Consequently, neither the AIFM
nor JHR is subject to supervision of the Dutch Central Bank (De Nederlandsche Bank,“DNB”) or the Netherlands Authority for Financial Markets (Autoriteit Financiële

2

Markten, the “AFM”) and this Article 23 AIFMD Prospectus is not subject to approval by
the AFM. No approved prospectus is required to be published in the Netherlands pursuant
to Article 3 of the Regulation (EU) 2017/1129 as amended and applicable in the
Netherlands. The AIFM is therefore solely subject to limited ongoing regulatory
requirements as referred to in Article 42 of the AIFMD.

3

Article 23 (1)(a)Objectives of the AIF

Focusing on hotels, which are important and profitable components of the social
infrastructure, JHR primarily invests in real estate related assets that are wholly or partiallyused as hotels and that are in themselves real estate or real estate equivalents or that arebacked by such real estate or real estate equivalents.

Investment strategy

JHR’s investment strategy is to ensure steady and stable revenue in the mid to long term.
JHR focuses on investing in hotels with prospects for attracting domestic and overseas
leisure demand, that is, those located in appealing or fashionable areas. Limited-service
hotels, full-service hotels and resort hotels are all investment targets, but JHR only
acquires properties with competitive advantages in terms of buildings and facilities(infrastructure) and the capabilities of the hotel tenant and operator (services). The
investment strategy is defined in the articles of incorporation of JHR and the investment
guidelines determined by the AIFM.

Types of assets the AIF

Real estate, trust beneficiary interests in real estate, real estate securities, specified assets

may invest in

and other assets, including equity interests in corporations holding overseas real estate(provided, however, that such corporations are required to be unlisted and all of its assets
be composed of real estate and monetary claims, etc. pertaining to such real estate andmeet certain other requirements under the Act on Investment Trusts and Investment
Corporations (the “ITA”)), renewable power generating facilities and the rights to operate
public facilities.

Techniques it may

JHR focuses on investing in hotels with prospects for attracting domestic and overseas

employ and all

leisure demand. The principal risks with respect to investment in JHR are as follows:

associated risks•

any adverse conditions in the Japanese economy could adversely affect JHR;•

The coronavirus pandemic, through its worldwide economic impact, may
adversely affect JHR;•

JHR may not be able to acquire properties to execute the growth and investment
strategy in a manner that is accretive to earnings;•

illiquidity in the real estate market may limit the ability to grow or adjust theportfolio;•

the past experience of the AIFM in the Japanese real estate market is not anindicator or guarantee of the future results;•

JHR’s reliance on the JHR’s related parties, the AIFM and its related parties could
have a material adverse effect on its business;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

4

•

JHR’s reliance on third party service providers, particularly on hotel lessees, hotel
operators and operation support companies, may have a material adverse effecton the revenue of the hotels, including as a result of the service providers’prioritizing the interests of their other clients;•

The pandemic of epidemics such as the coronavirus may cause a significant
decline in hotel demand and may result in a material adverse effect on therevenues of the hotels;•

JHR may change its detailed investment policy without a formal amendment of thearticles of incorporation;•

there are potential conflicts of interest between JHR, the AIFM and its relatedparties, including those arising among the AIF and private funds or other investors,
to which the AIFM provides investment management or advisory services;•

the AIFM’s provision of investment management or advisory services to otherfunds may expose the AIFM to indemnification and other obligations inconnection with such services;•

JHR’s revenues largely comprise leasing revenues and income from management
contract from the portfolio properties, which may be negatively affected byfactors including vacancies, decreases in rent or sales, and late or missed
payments by tenants or the operators to which it outsources operation of certain
properties;•

income from management contract is tied to the revenue of the hotels withrespect to which operation is outsourced to operators, and the agreement with anoperator generally does not provide for a fixed rent; as a result, income frommanagement contract may be volatile and could have a material adverse effect on
JHR’s results;•

competition for guests with other hotel properties in the same and surrounding
areas, as well as with short-term lodging such as vacation rentals and apartment
rentals including Airbnb, may adversely affect JHR’s ability to maintain occupancy
rates and revenue;•

JHR may find difficulty finding suitable tenants or operators to which it outsources
operation of certain properties, because of the requirement that they be able tooperate hotels;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

5

•

increases in interest rates may increase the interest expense and may result in a
decline in dividends and market price of the units;•

JHR may suffer large losses if any of the properties incurs damage from a natural
or man-made disaster;•geographic concentration of the portfolio in major cities in Japan could have amaterial adverse effect on JHR’s business;•

any inability to obtain financing or refinancing from issuance of investments units,loan and issuance of investment corporation bonds for future acquisitions could
adversely affect the growth of the portfolio;•

JHR’s failure to satisfy a complex series of requirements pursuant to Japanese tax
regulations would disqualify JHR from certain taxation benefits and significantly
reduce the cash distributions to the unitholders;•the ownership rights in some of the properties may be declared invalid or limited;and•support from JHR’s related parties, particularly in connection with management ofhotels, may not achieve the anticipated results.

In addition, JHR is subject to the following risks:•

risks related to operation of hotels;•risks related to specialization in investment in hotels;•risks related to the small number of tenants per each building;•risks related to seasonality of our performance;•risks related to maintenance of facilities and infrastructure;•risks related to increasing operating costs;•

risks related to JHR’s dependence on the efforts of the AIFM’s key personnel;•risks related to the restrictive covenants under debt financing arrangement;•risks related to covenants with lessees or hotel operators prohibiting JHR fromtransferring its properties as well as other third-party approval requirements;•

risks related to entering into forward commitment contracts;•

risks related to third party leasehold interests in the land underlying JHR’s
properties;•risks related to holding the property in the form of compartmentalized ownership(kubun shoyū) interests or co-ownership interests (kyōyū-mochibun);•risks related to holding the property through trust beneficiary interests;

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

6•risks related to properties not in operation (including properties underdevelopment);•risks related to defective title, ground, design or construction (including withrespect to piles and beams of buildings, as well as seismic and vibration insulation
oil dampers) or other defects, non-conformity or problems in the properties;•risks related to suffering impairment losses relating to the properties;•risks related to decreasing tenant leasehold deposits and/or security deposits;•risks related to tenants’ default as a result of financial difficulty or insolvency;•

risks related to the insolvency of master lessor;•

risks related to relying on expert appraisals and engineering, environmental andseismic reports as well as industry and market data by third party experts andstatistics or projections published by the Japanese government or its related
entities;•

risks related to the presence of hazardous or toxic substances in the properties, orthe failure to properly remediate such substances;•risks related to the strict environmental liabilities for the properties;•risks related to the amendment of the applicable administrative laws and local
ordinances;•risks related to investments in trust beneficiary interest;•

risks related to the tight supervision by the regulatory authorities;•risk of non-compliance with applicable rules and regulations, including withrespect to insider trading under the Financial Instruments and Exchange Act (the“FIEA”) or management of personal information under the Act on the Protectionof Personal Information or the Act on the Use of Numbers to Identify a Specific
Individual in the Administrative Procedure;•risks related to the tax authority disagreement with the AIF’s understanding ofJapanese tax laws and regulations;•risks related to being unable to benefit from reductions in certain real estate taxes
enjoyed by qualified J-REITs;•

risks related to changes in Japanese tax laws; and•the risk of dilution as a result of further issuances of units.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

7

Any applicable

JHR is subject to investment restrictions under Japanese laws and regulations (e.g., the Act

investment restrictions

on Investment Trusts and Investment Corporations (the “ITA”), the Financial Instruments
and Exchange Act) as well as its articles of incorporation.
JHR must invest primarily in specified assets as defined in the ITA. Specified assets include,
but are not limited to, securities, real estate, leaseholds of real estate, surface rights(chijō-ken) (i.e., right to use land for the purpose of having a structure on it) or trust
beneficiary interests for securities, real estate, leaseholds of real estate or surface rights.
Furthermore, a listed J-REIT must invest substantially all of its assets in real estate, realestate-related assets and liquid assets as provided by the listing requirements. Real estatein this context includes, but is not limited to, real estate, leaseholds of real estate, surface
rights, and trust beneficiary interests for these assets, and real estate-related assets in thiscontext include, but are not limited to, anonymous association (tokumei kumiai) interests
for investment in real estate.

Pursuant to the ITA, investment corporations may not independently develop land for
housing or to construct buildings, but may outsource such activities in certain
circumstances.
Circumstances in

JHR may take out loans or issue long-term or short-term investment corporation bonds forwhich the AIF may use

the purpose of investing in properties, conducting repairs, paying cash distributions,leverage

repaying obligations (including repayment of tenant leasehold or security deposits, andobligations related to loans or long-term or short-term investment corporation bonds) andother activities.

The types and sources

Loans or investment corporation bonds. JHR currently does not have any outstandingof leverage permitted

guarantees, but may be subject to restrictive covenants in connection with any future

and associated risks

indebtedness that may restrict the operations and limit the ability to make cash
distributions to unitholders, to dispose of the properties or to acquire additional
properties. Furthermore, JHR may violate restrictive covenants contained in the loan
agreements JHR executes, such as the maintenance of debt service coverage or loan-tovalue ratios, which may entitle the lenders or bondholders to require JHR to collateralize
the properties or demand that the entire outstanding balance be paid. Further, in theevent of an increase in interest rates, to the extent that JHR has any debt with unhedged
floating rates of interest or JHR incurs new debt, interest payments may increase, which inThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

8

turn could reduce the amount of cash available for distributions to unitholders. Higher
interest rates may also limit the capacity for short- and long-term borrowings, which
would in turn limit the ability to acquire properties, and could cause the market price of
the units to decline.
Any restrictions on

The maximum amount of each loan and investment corporation bond issuance will be one

leveragetrillion yen (the maximum amount of short-term investment corporation bond issuance
will be 250 billion yen), and the aggregate amount of all such debt will not exceed one
trillion yen.

Any restrictions on

No applicable arrangements.

collateral and asset
reuse arrangements
Maximum level of

JHR has set an upper limit of 65% as a general rule for its loan-to-value, or LTV, ratio inleverage which theorder to operate with a stable financial condition. JHR may, however, temporarily exceed

AIFM is entitled toany such levels as a result of property acquisitions or other events.

employ on behalf of
the AIF
Article 23(1) (b)Procedure by which

Amendment of the articles of incorporation. Amendment requires a quorum of a majority

the AIF may change itsof the total issued units and at least a two-thirds vote of the voting rights represented atinvestment strategy /the meeting. Unitholders should note, however, that under the ITA and our articles ofinvestment policy

incorporation, unitholders who do not attend and exercise their voting rights at a General
Meeting of Unitholders are deemed to be in agreement with proposals submitted at themeeting, except in cases where contrary proposals are also being submitted.
Additionally, the guidelines of the AIFM, which provide more detailed policies within JHR’s
overall investment strategy and policy, can be modified without such formal amendmentof the articles of incorporation.

Article 23(1) (c)Description of the

JHR has entered into an Agreement with Kyoritsu Maintenance Co., Ltd. for support for

main legal implications

property acquisition, pursuant to which JHR receives information regarding theof the contractual

prospective sales of real estate and trust beneficiary interests for real estate.

relationship enteredinto for the purpose ofinvestment, including

JHR has entered into a Basic Agreement with Sumitomo Mitsui Trust Bank, Limited for
information provision regarding sales or brokerage of income-type properties held ordeveloped by third parties.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

9jurisdiction, applicable

In 2011, JHR succeeded to an Information Service Agreement with Goldman Sachs (Japan)

law, and the existenceCo., Ltd. pursuant to which JHR receives information regarding real estate and trust

or not of any legal

beneficial rights for real estate; this agreement was originally executed with JHR’s

instruments providing

predecessor, Japan Hotel and Resort Investment Corporation and Japan Hotel and Resort,for the recognition andInc.

enforcement of
judgments in the
territory where the AIF
is establishedAll of the above agreements are governed by Japanese law.
JHR is not involved in or threatened by any legal arbitration, administrative or otherproceedings, the results of which might, individually or in the aggregate, be material.

JHR is a corporate-type investment trust in the form of investment corporation (toshi
hojin) provided for under the ITA. Therefore, the relationship between JHR and its
unitholders is governed by JHR’s articles of incorporation (as opposed to individual
agreements), which can be amended from time to time upon resolution of a generalunitholders’ meeting. JHR’s articles of incorporation stipulate rules relating to generalunitholders meetings, including the convocation, setting of record date, exercise of voting
rights, resolutions and election of JHR’s directors.
The relationship between JHR and its unitholders is also governed by, and is subject to theprovisions of, Japanese law, including the ITA.
The courts in Japan would recognize as a valid and final judgment any final and conclusive
civil judgment for monetary claims (which, for this purpose, are limited to those of apurely civil nature and do not include monetary claims of the nature of criminal oradministrative sanction, such as punitive damages, even though they take the form of civil
claims) against JHR obtained in a foreign court provided that (i) the jurisdiction of suchforeign court is admitted under the laws of Japan, (ii) JHR has received service of process
for the commencement of the relevant proceedings, otherwise than by a public notice or
any method comparable thereto, or has appeared without any reservation before suchforeign court, (iii) neither such judgment nor the relevant proceeding is repugnant topublic policy as applied in Japan, and (iv) there exists reciprocity as to the recognition bysuch foreign court of a final judgment obtained in a Japanese court and (v) there is noconflicting judgement on the subject matter by any Japanese court.
Article 23(1) (d)This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

10

The identity of the• AIFM (Asset Manager): Japan Hotel REIT Advisors Co., Ltd.

AIFM, AIF's depository,

The AIFM provides services related to asset management, financing of the AIF,

auditor and any otherreporting to the AIF, asset management planning for the AIF, and other mattersservice providers and adelegated by the AIF.

description of their• Auditor: KPMG AZSA LLC

duties and the

The Auditor audits financial statements, prepares audit reports, and reports to theinvestors' rights

supervisory directors if it finds any misconduct or any material fact that is in violation oftheretolaws and regulations or the articles of incorporation with regard to execution of theduties of the executive director.
• General Administrator (for administration), Custodian, Transfer Agent and Special
Accounts Administrator: Sumitomo Mitsui Trust Bank, Limited
The General Administrator (for administration) provides administrative services related
to administration of accounting matters, preparation of accounting books, tax-related
services (other than those entrusted to PwC Tax Japan) and management and recordingof board of directors meetings. The Custodian provides administrative services related
to custody of our assets. The Transfer Agent provides administrative services related topreparation and maintenance of the unitholder registry, payments of cash distributions
to unitholders, acceptance of requests for the exercise of voting rights by unitholders
or any other applications from unitholders, and distribution of meeting convocation
notices and other unitholder notifications and information. The Special Accounts
Administrator provides administrative services, including the preparation, management
and custody of the transfer account book in relation to special accounts.
• General Administrator (for investment corporation bonds): Sumitomo Mitsui Trust
Bank, Limited, Mizuho Bank, Ltd., Resona Bank Limited. and MUFG Bank, Ltd.
The General Administrators provides administrative services in connection with the
AIF’s investment corporation bonds.
• General Administrator (for tax payment): PwC Tax JapanThe General Administrator provides tax-related administrative services.
Service providers owe contractual obligations under their respective agreements with theAIF, as the case may be. In addition, the FIEA provides that the Asset Manager owes the
AIF a fiduciary duty and must conduct its activities as the asset manager in good faith.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

11

The FIEA also prohibits the Asset Manager from engaging in certain specified conduct,
including entering into transactions outside the ordinary course of business or with relatedparties of the Asset Manager that are contrary to or violate the AIF’s interests.
Pursuant to the ITA, the unitholders have the right to approve the execution or
termination of the asset management agreement at a General Meeting of Unitholders.
Article 23(1) (e)Description of how the

Not applicable.

AIFM complies withthe requirements tocover professional
liability risks (ownfunds / professional
indemnity insurance)
Article 23(1) (f)Description of any
delegatedmanagement function
such as portfolio
management or risk

Not applicable.
There is no delegation of such functions beyond the AIFM, which is responsible for
portfolio and risk management, and the Custodian, which is responsible for safekeeping
activities.

management and of
any safekeeping
function delegated by
the depositary, theidentification of thedelegate and any
conflicts of interest
that may arise fromsuch delegations
Article 23(1) (g)Description of the AIF’s JHR makes investment decisions based on the valuation of properties, upon consideration
valuation procedureand pricing
methodology,of the property appraisal value.
JHR shall evaluate assets in accordance with its articles of incorporation. The methods andstandards that JHR uses for the evaluation of assets shall be based on the Regulations

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

12

including the methods

Concerning the Calculations of Investment Corporations, as well as the Regulations

used in valuing hard-

Concerning Real Estate Investment Trusts and Real Estate Investment Corporations andto-value assets

other regulations stipulated by the Investment Trusts Association, Japan, in addition to
Japanese GAAP.
The rules of the Investment Trusts Association, Japan, emphasize market price valuation.

Article 23(1) (h)Description of the AIF’s The AIFM stipulates basic provisions of risk management in its risk management rules.
liquidity risk
management,
including redemption
rights in normal andexceptional
circumstances andexisting redemption
arrangements withinvestors

Additionally, the AIF uses various financing methods, including investment corporation
bonds and long-term loans, to finance acquisitions and repayment obligations. JHR
controls related risk by maintaining the ratio of interest-bearing debt to total assets undera certain percentage, diversifying repayment deadlines, and retaining a certain amount ofhighly liquid cash and deposits.
For floating rate borrowings exposed to the risk of interest rate fluctuations, JHR closely
monitors the movement of interest rates.
As JHR is a closed-end investment corporation, unitholders are not entitled to request theredemption of their investment.

Article 23(1) (i)Description of all fees,

Compensation: The articles of incorporation provide that JHR may pay its executive andcharges and expenses

supervisory officers up to 800,000 and up to 500,000 yen per month. The board of officers

and a maximum

is responsible for determining a reasonable compensation amount for the executive andamount which issupervisory officers.

directly / indirectly
borne by the investors

Asset Manager:• Asset Management Fee: JHR will pay the Asset Manager an asset management fee asfollows:
1. Management Fee 1
The amount calculated by (i) multiplying the balance of total assets(*) held by JHR
as of the end of March, June, September and December, (the “Calculation Recorddate”) by an annual rate of no more than 0.35% to be separately agreed upon
between the JHR and the AIFM and (ii) then prorated on a per day basis (whereamounts less than one yen are rounded down), based on a year of three hundred

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

13

sixty five days, for the period from the previous Calculation Record Date (notincluding such date) until the relevant Calculation Record Date (including such date).
(*) The total assets are the total of the cash reserves balance, the securities balance,
tangible fixed assets and intangible fixed asset.
Management Fee 1 is payable within three month from the each Calculation Record
date.
2. Management Fee 2
The amount calculated by multiplying Net Operating Income(*) of JHR for each fiscal
period by a rate of no more than 1.0% to be separately agreed upon between JHR
and the AIFM.
Provisional Management Fee 2(**) shall be paid within three months after the endof March, June and September each year, and the balance after deducting theaggregate amount of Provisional Management Fee 2 paid from accrued
Management Fee 2 shall be paid within three months after the end of December. In
the event that the aggregate amount of Provisional Management Fee 2 paid exceeds
the amount of accrued Management Fee 2, the excess will be refunded within threemonths after the end of December each year.
(*) Net Operating Income is the amount calculated by subtracting real estate
operating costs (not including Depreciation) from real estate operating revenue.
(**)Provisional Management Fee 2 is the amount calculated by multiplying Net
Operating Income of JHR for each of three-month periods ending at the end of
March, June and September each year, by a rate of no more than 1.0% to be
separately agreed upon between JHR and the AIFM
3. Management Fee 3
The amount calculated by (i) dividing the total available dividend amount before
deducting Management Fee 3(*) for each fiscal period of JHR by the total investment
units issued at the end of December each year (where amounts less than one yen
are rounded down.) and (ii) then multiplying the coefficient of no more than 43,000
which separately agreed upon between JHR and the AIFM. (In the event that theThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

14

investment unit is split, 43,000 shall be multiplied by split ratio(**). When theinvestment unit is split multiple times, the same calculation shall be repeated.)(*) Total available dividend before deducting the Management Fee 3 is the dividend
amount for each fiscal period of JHR stipulated by Article 34, Clause 1 of the articles
of incorporation (before deducting corporate tax, inhabitant tax and business tax,
adjustment amount of the corporate tax, Management Fee 3 and its nondeductible
consumption tax, etc.).
(**) Split ratio is the ratio calculated by (i) dividing the total investment units issued
after split by the total investment units issued before split.
The Provisional Management Fee 3(*) shall be paid within three months after theend of March, June and September each year, and the balance after deducting theaggregate amount of Provisional Management Fee 3 paid from accrued
Management Fee 3 shall be paid within three months after the end of December. In
the event that the aggregate amount of Provisional Management Fee 3 paid exceeds
the amount of accrued Management Fee 3, the excess will be refunded within threemonths after the end of December each year.
(*) Provisional Management Fee 3 is the amount calculated by (i) dividing themidterm net profit before tax for the period of three months ending at the end of
March, June and September each year (before deducting Provisional Management
Fee 3 and its nondeductible consumption tax) by the total investment units issued
as of the end respectively of March, June and September above (where amounts
less than one yen are rounded down), and (ii) then multiplying the coefficient of no
more than 43,000 to be separately agreed upon between JHR and the AIFM (In theevent that the investment unit is split, 43,000 shall be multiplied by the split
ratio(**). When the investment unit is split multiple times, the same calculation
shall be repeated.)(**) The split ratio is the ratio calculated by (i) dividing the total investment units
issued after the split by the total investment units issued before the split.
4. Acquisition Fee
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

15

For each acquisition of a real estate-related property, the AIFM receives an
Acquisition Fee. The amount of the Acquisition Fee is calculated by multiplying theacquisition price (not including consumption tax pertaining to the building etc.
(stipulated by Article 39 of the articles of incorporation, the same applies
hereinafter) and other acquisition costs) by a rate of no more than 0.75% to be
separately agreed upon between JHR and the AIFM (where amounts less than one
yen are rounded down). In the event that JHR acquires a real estate-related
property from a sponsor-related party(*), such rate shall be lowered by 0.25%(stipulated in Article 36 of the articles of incorporation).
The Acquisition Fee shall be paid by the end of the month following the month of
acquisition.
5. Disposition Fee
For each disposition of a real estate-related property, the AIFM receives a
Disposition Fee. The amount of the Disposition Fee is calculated by multiplying thetransfer price (not including consumption tax pertaining to the building etc. and thesales cost etc.) by a rate of no more than 0.5% to be separately agreed upon
between JHR and the AIFM (where amounts less than one yen are rounded down).
In the event that JHR sells the real estate-related property to a sponsor-related
party(*), such rate shall be lowered by 0.25% (stipulated in Article 36 of the articles
of incorporation).
The Disposition Fee shall be paid by the end of the month following the month of
the transfer.
(*) The term “sponsor-related party” is stipulated in the AIFM’s rules fortransactions with sponsor-related parties, and includes (a) interested parties, etc.,(b) the AIFM’s shareholders, (c) companies, etc. that take a 50% or more stake in ashareholder that holds 50% or more of the shares in the AIFM, (d) companies inwhich a shareholder of the AIFM has a 50% or more stake, (e) entities or persons
who ceased to fall under (a) through (d) within the last 3 months, and (f) entities or
persons who are deemed appropriate by the compliance officer to be treated assponsor-related parties in light of the AIFM’s rules for transactions with sponsorrelated parties and the purpose of these rules.
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

16

6. Merger Fee
In the event that JHR succeeds to the assets of another party pursuant to a merger,
following the due diligence, valuation and other merger-related tasks conducted by
the AIFM of such assets held by such party, the AIFM receives a Merger Fee
according to the Asset Management Agreement between JHR and the AIFM. The
amount of Merger Fee is calculated by (i) multiplying the appraisal value, as of themerger date, of the real estate-related assets JHR succeeds to, by a rate of no morethan 0.25% to be separately agreed upon JHR and the AIFM (where amounts lessthan one yen are rounded down) and (ii) adding to (i) the consumption tax
pertaining to the amount calculated in (i). The Merger Fee shall be paid within threemonths from the effective date of the merger.

Custodian/ General Administrator:•

Custodian Fee, General Administrator Fee:
1. JHR will pay the Custodian in connection with custody.
2. JHR will pay the General Administrator, in connection with accounting,government of the Investment Corporation, preparation of tax return, fiscal
agent of investment corporation bond and other tasks agreed upon between
JHR and the General Administrator.

Transfer Agent:• Transfer Agent Fee (Standard Fee):
Standard transfer agent fees are for services such as preparation, maintenance andstorage of JHR’s unitholder register; preparation and reporting of the end-of-fiscal
period unitholders register and unitholder statistical data.
The monthly standard fees will be the total of the amount calculated using thefollowing table divided by 6, with a minimum monthly fee of 200,000 yen.
Number of Unitholders

Fees per Unitholder

first 5,000 unitholders

480 yenover 5,000 to 10,000

420 yen

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

17

over 10,000 to 30,000

360 yenover 30,000 to 50,000

300 yenover 50,000 to 100,000

260 yenover 100,000

225 yen• Other fees:
JHR pays the transfer agent other fees for various other services, including inconnection with the payment of dividends.
Special Accounts Administrator• Special Accounts Administrator Fee:
Special accounts administrator fees are for the administration of special accounts,
including preparation and maintenance of a ledger related to such accounts andhandling of inquiries from Japan Securities Depository Center (JASDEC). The
standard fees will be the total of the amount calculated using the following table,with a minimum monthly fee of 20,000 yen.
Number of Subscribers

Fees per Subscribers

first 5,000 subscribers

150 yenover 5,000 to 10,000

130 yenover 10,000 subscribers

110 yen• Other fees:
JHR pays the special accounts administrator other fees for various other services,
including in connection with receipt and confirmation of requests for transfers andfor processing transfers to a recipient account.
Auditor:• Auditor Fee:JHR shall pay the independent auditor up to 30 million yen per fiscal period within
three months after the date of the invoice from the independent auditor. The board
of officers is responsible for determining the actual compensation amount.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

18

The AIF may also incur other miscellaneous fees in connection with property
management, issuance of units, investment corporation bonds and the operation,acquisition or disposition of properties.
Article 23(1) (j)Description of theUnder Article 77 paragraph 4 of the Act on Investment Trusts and Investment

AIFM's procedure to

Corporations of Japan, which applies the requirements of Article 109 paragraph 1 of theensure fair treatment

Companies Act to investment corporations, investment corporations are required to treatof investors and details

unitholders equally depending on the number and content of units held. In addition, uponof any preferential

liquidation, the allotment of residual assets to unitholders is required to be made equallytreatment received bydepending on the number units held under Article 77 paragraph 2 item 2 and Article 158

investors, includingof the ITA.

detailing the type ofinvestors and theirlegal or economic links
with the AIF or AIFM
Article 23(1) (k)The latest annual

Additional information may be found in our most recent annual report prepared inreport referred to inaccordance with Article 22 of the AIFMD, which is available at the Asset Manager’s office

Article 22(1)located at Ebisu Neonato, 4-1-18, Ebisu, Shibuya-ku, Tokyo 150-0013 Japan.

Article 23(1) (l)The procedure andJHR is authorized under the articles of incorporation to issue up to 20,000,000 units. Its

conditions for theunits have been listed on the Tokyo Stock Exchange since June 14, 2006. (*)

issue and sale of the(*) On April 1, 2012, the former Japan Hotel and Resort, Inc. merged with and into theunitsformer Nippon Hotel Fund Investment Corporation, which, as the surviving entity, changed
its name to Japan Hotel REIT Investment Corporation.
Secondary market sales and transfers of units will be conducted in accordance with therules of the Tokyo Stock Exchange. Unit prices on the Tokyo Stock Exchange aredetermined on a real-time basis by the equilibrium between bids and offers. The Tokyo
Stock Exchange sets daily price limits, which limit the maximum range of fluctuation within
a single trading day. Daily price limits are set according to the previous day’s closing priceor special quote.

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

19

Article 23(1) (m)Latest net asset valueof the AIF or latest
market price of theunit or share of the AIF

JHR’s unit’s latest market price is publicly available at the Tokyo Stock Exchange or fromfinancial information venders (including Reuters, which can be viewed at
http://www.reuters.com/finance/stocks/overview?symbol=8985.T).

Article 23(1) (n)Details of the historical

The units of JHR were listed on the Tokyo Stock Exchange on June 14, 2006.

performance of the

The most recent five fiscal periods’ performance of the units is as follows.

AIF, where available
Fiscal period

Total Assets

Net Assets(JPY million)(JPY million)

Net Assets
per unit(JPY)

24th Fiscal Period(January 1, 2023 to429,955

244,980

52,831

396,799

223,574

50,050394,323

221,542

49,595400,296

221,201

49,570415,722

236,52253,004

December 31, 2023)
23rd Fiscal Period(January 1, 2022 to
December 31, 2022)
22nd Fiscal Period(January 1, 2021 to
December 31, 2021)
21st Fiscal Period(January 1, 2020 to
December 31, 2020)
20th Fiscal Period(January 1, 2019 to
December 31, 2019)
Article 23(1) (o)Identity of the prime

No applicable prime broker.

broker, any material
arrangements of theThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

20

AIF with its prime
brokers, how conflictsof interest aremanaged with theprime broker and theprovision in thecontract with thedepositary on thepossibility of transfer
and reuse of AIF
assets, andinformation about any
transfer of liability tothe prime broker that
may exist
Article 23(1) (p)Description of how and The AIFM will disclose the matters described in Articles 23(4) and 23(5) periodicallywhen periodic

through the AIF Internet website and other public disclosures.

disclosures will bemade in relation toleverage, liquidity andrisk profile of theassets, pursuant to
Articles 23(4) and23(5)Article 23(2)The AIFM shall inform

Not applicable.

the investors before
they invest in the AIF
of any arrangement
made by thedepository tocontractually discharge
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

21

itself of liability inaccordance with
Article 21(13)The AIFM shall also

Not applicable.

inform investors of any
changes with respect
to depositary liability
without delay
Article 23(4)(a)Percentage of the AIF's assets which

There are no assets that are subject to special arrangements arising fromare subject to special arrangements

their illiquid nature.

arising from their illiquid nature. The
percentage shall be calculated as the
net value of those assets subject tospecial arrangements divided by the
net asset value of the AIF concerned
Overview of any special

There are no such special arrangements.

arrangements, including whether
they relate to side pockets, gates orother arrangements
Valuation methodology applied to

There are no such special arrangements.

assets which are subject to sucharrangements
How management and performance

There are no such special arrangements.

fees apply to such assets
Article 23(4)(b)Any new arrangements for managing

Any new arrangements or change in applicable arrangements will be

the liquidity of the AIF

disclosed at an appropriate time.

For each AIF that the AIFM manages

Any new arrangements or change in applicable arrangements will bethat is not an unleveraged closed-end

disclosed at an appropriate time.

AIF, notify to investors wheneverthey make changes to its liquidity
management systems (which enable
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

22

an AIFM to monitor the liquidity riskof the AIF and to ensure the liquidity
profile of the investments of the AIF
complies with its underlying
obligations) that are material inaccordance with Article 106(1) ofRegulation (EU) No 231/2013 (i.e.,there is a substantial likelihood that areasonable investor, becoming awareof such information, would
reconsider its investment in the AIF,
including because such information
could impact an investor’s ability to
exercise its rights in relation to its
investment, or otherwise prejudice
the interests of one or more investors
in the AIF).
Immediately notify investors where

Any new arrangements or change in applicable arrangements will bethey activate gates, side pockets ordisclosed at an appropriate time.

similar special arrangements or
where they decide to suspend
redemptions
Overview of changes to liquidity

Any new arrangements or change in applicable arrangements will bearrangements, even if not special

disclosed at an appropriate time.

arrangements
Terms of redemption and

JHR is a closed-end investment corporation, and unitholders are notcircumstances where management

entitled to request the redemption of their investment.

discretion applies, where relevant
Also any voting or other restrictions

There are no voting or other restrictions on the rights attaching to units.

exercisable, the length of any lock-up
or any provision concerning ‘first inline’ or ‘pro-rating’ on gates andsuspensions shall be included
This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

23

Article 23(4)(c)
The current risk profile of the AIF and

The AIFM stipulates basic provisions of risk management in their risk

the risk management systems

management rules.

employed by the AIFM to manage
those risks

Investment corporation bonds and long-term loans are used to financerehabilitation obligations, acquisition of real estate and repayment of loans.
These financial instruments are exposed to liquidity risk. JHR controls suchrisks by maintaining the ratio of interest-bearing debt to total assets undera certain percentage and diversifying repayment deadlines.
For floating rate borrowings exposed to the risk of interest rate
fluctuations, JHR, in order to reduce the impact caused by rising interest
rates, closely monitors the movement of interest rates, and intends toincrease the ratio of fixed rate loans compared to floating rate loans.

Measures to assess the sensitivity of

No such measures have been implemented.

the AIF’s portfolio to the most
relevant risks to which the AIF is or
could be exposed
If risk limits set by the AIFM have

No such situation has occurred.

been or are likely to be exceeded andwhere these risk limits have been
exceeded a description of thecircumstances and the remedial
measures taken
Article 23(5)(a)Any changes to the maximum

Any new arrangements or change in applicable arrangements will beamount of leverage which the AIFM

disclosed at an appropriate time.

may employ on behalf of the AIF,
calculated in accordance with thegross and commitment methods. This
shall include the original and revised
maximum level of leverage calculated
in accordance with Articles 7 and 8 ofThis document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

24

Regulation (EU) No 231/2013,
whereby the level of leverage shall becalculated as the relevant exposure
divided by the net asset value of the
AIF.
Any right of the reuse of collateral or

No such right or guarantee exists.

any guarantee granted under theleveraging agreement, including thenature of the rights granted for thereuse of collateral and the nature of
the guarantees granted
Details of any change in service

Any new arrangements or change in applicable arrangements will be

providers relating to the above.

disclosed at an appropriate time.

Article 23(5)(b)Information on the total amount of

The aggregate amount of debt with interest is JPY 175,231 million as ofleverage employed by the AIF

December 31, 2023.

calculated in accordance with thegross and commitment methods

This document has been prepared solely for the purpose of providing U.K. and Dutch investors with certain information
under Article 23 of the AIFMD as implemented in their respective jurisdictions. This document is not an offer to sell or asolicitation of any offer to buy the units of Japan Hotel REIT Investment Corporation.

25

PROMOTION OF ENVIRONMENTAL AND/OR SOCIAL CHARACTERISTICS – SFDR PRECONTRACTUAL DISCLOSURE
Product Name: Japan Hotel REIT Investment Corporation
Legal Identifier: 353800L8KG849FP1JI68
Japan Hotel REIT Investment Corporation (hereafter referred to as “we”, “us” or “our”) promotes
environmental or social characteristics, but does not have as its objective a sustainable investment within the meaningof article 9(1) of Regulation (EU) 2019/2088 (“SFDR”). We have no reference benchmark designated for the purposesof attaining the environmental or social characteristics promoted by our investment units.
Does this financial product have a sustainable investment objective?
☐ Yes
☒ No
☐ It will make a minimum of sustainable ☐ It
promotes
Environmental/Social(E/S)
investments with an environmental
characteristics and while it does not have as its objective
objective: __%a sustainable investment, it will have a minimum
proportion of __% of sustainable investments☐ in economic activities that qualify☐ with an environmental objective in economic
as environmentally sustainable
under the EU Taxonomy
activities that qualify as environmentally
sustainable under the EU Taxonomy☐ in economic activities that do not☐ withanenvironmental
objectiveinqualifyasenvironmentally
sustainable
under
the EUeconomic activities that do not qualify as
Taxonomyenvironmentally sustainable under the EU
Taxonomy☐ with a social objective☐ It will make a minimum of sustainable
investments with a social objective: __%☒ It promotes E/S characteristics, but will not make any
sustainable investments

What environmental and/or social (“E/S”) characteristics are promoted by Japan Hotel REIT Investment
Corporation?
We, together with Japan Hotel REIT Advisors (the “Asset Manager”), are making efforts to enhance thesustainability of our business through consideration of ESG (Environment, Social & Governance) issues, on the belief
that sound management, which enables us to co-exist in harmony with society and our environment, will improve
unitholder value over the medium to long term. We and the Asset Manager established a Sustainability Policy inDecember 2017 and are pursuing a series of ESG measures, including reduction of our environmental impact inconsideration of all of our stakeholders. In December 2021, in order to further enhance our ESG initiatives, we
identified the ESG issues that we consider to be most material to us and are promoting measures to address thoseissues.
We have implemented various environmental initiatives including the following.
•

Reducing GHG emissions. We aim to reduce GHG emissions by 30% per floor area in our portfolio（GHG emissions intensity）compared to FY2017 until 2050 as a long term target.

•

Preserving the Local Environment. Hotel Nikko Alivila participates in beach clean-up activities every
year in Yomitan, hosted by Yomitan Village in Okinawa. Nirai Beach is located in front of Hotel Nikko

Alivila, which is famous for having one of the most beautiful ocean waterfronts on Okinawa’s mainisland. The hotel staff cleans the beach every morning and conducts beach preservation activities, andas a result, visitors are able to observe sea turtles laying eggs and eggs hatching on the beach. Hotel
Nikko Alivila is a member of the Sea Turtle Association of Japan.
We have implemented various social initiatives at our properties including the following.
•

Supporting Cultural Activities and Child-rearing in Local Communities. Based on the policy of making
itself “friendly to the Earth, local community and family,” Oriental Hotel tokyo bay proactively engages
in local community events, such as local festivals and events to promote disaster preparedness. Oriental
Hotel tokyo bay also supports local art and cultural activities by hosting an annual chapel concert andproviding our space for galleries. Oriental Hotel tokyo bay is also dedicated to supporting child caresuch as through cooperation with an after-childbirth support project sponsored by Urayasu City toprovide physical and mental health care to mothers and their babies. In 2010, the hotel received the Kids
Design Award, co-sponsored by the Kids Design Association, a non-profit organization that aims toenhance safety for children and create a society that enables their healthy growth, and the Ministry of
Economy, Trade and Industry of Japan, the first for a hotel in Japan.

•

Initiatives for HR Development. To help development of its real estate management professionals, theAsset Manager supports them in acquiring professional certifications such as ARES (Association forReal Estate Securitization) Certified Master, an educational program that teaches practical, specialized
knowledge in the real estate and finance fields, for all officers and employees. We cover the full cost ofparticipation in training relating to practical knowledge, industry trends and compliance. As of December
31, 2023, 20 employees had been certified as real estate brokers, three3 employees had been certified asreal estate appraisers, three employees had been certified as a building administrator registered with theJapanese Building Management Institute as a specialist in building administration, two employees had
been certified as official real estate consulting masters registered with Real Estate Transaction Promotion
Center with knowledge and expertise for real estate consulting and 14 employees had been certified as
ARES Certified Masters.

•

Initiatives for Employee Health and Well-being. The Asset Manager has established a Health Committee
to improve standards of health for employees and promote wellness. The committee, which meets oncea month, reviews employee health-related matters, including the status of work performed by all
employees and the well-being and safety of the work environment. After each committee meeting, advice
from an occupational health physician, who is a member of the Health Committee, is distributed to all
employees. The Asset Manager subsidizes the costs of annual physical exams and flu shots. The AssetManager also allows its employees to consult with an occupational health physician about mental healthissues as needed.

•

Respect for Human Rights, Diversity and Equality of Opportunities. Internal rules of the Asset Manager
explicitly prohibit discrimination based on ethnicity, religion, gender, age, origin or nationality. Throughcompliance training, we promote respect for diversity of perspectives and values and raise awareness toeliminate discrimination and harassment.

•

Whistleblowing. The Asset Manager has established whistleblower rules and a whistleblowing hotlinethat allows its officers and employees (including contract and temporary employees) to report or consult
about potential harassment, fraud or other inappropriate acts. In accordance with the Whistleblower
Protection Act of Japan, the rules protect whistleblowers by prohibiting mistreatment uponwhistleblowing, allowing anonymous reports and keeping whistleblowers’ reports confidential, andstipulate procedures to find and correct reported acts, including investigation methods and disciplinary
actions for those who are found to have engaged in inappropriate behavior. In addition to an in-house
contact, a whistleblower may consult an outside attorney who has no business relationship with us.

•

Communication with Employees. The Asset Manager conducts an annual employee satisfaction survey
to consider and implement improvement measures. The Asset Manager also organizes workshops thatboth senior level and junior level employees attend to discuss our branding strategy and share values
with each other, with the aim of becoming a better company through two-way communication between
management and employees. The Asset Manager also takes into consideration proposals for workplace
improvement that we learn from employees during those workshops.
•

Contribution to an Inclusive Society. The Asset Manager has introduced a re-employment system for
employees aged 60 and over who wish to continue working. The Asset Manager has established a labor
environment where senior personnel may remain active after the official retirement age by leveraging
their work experience and expertise.

What sustainability indicators are used to measure the attainment of the E/S characteristics promoted by Japan
Hotel REIT Investment Corporation?
We use the following indicators to measure the attainment of the E/S characteristics we promote.
•Environmental Certification. In order to ensure the credibility of our initiatives aimed at reducing ourenvironmental impact, we have obtained green building certifications from third-party experts such as theComprehensive Assessment System for Built Environment Efficiency (“CASBEE”) and the Building-Housing
Energy-efficiency Labeling System (“BELS”) Evaluation. As of March 31, 2024, we had acquired “B+: Good”
from CASBEE for two of our properties. Additionally, we acquired two stars out of BELS’ five-star ranking
system for one of our properties, three stars for one properties and its highest rating, five stars, for one of ourproperties (“Green Certified Assets”).

•

GRESB Real Estate Assessment. The GRESB, established in 2009, validates ESG performance data and provide
benchmarks for measuring real estate companies’ and institutional funds’ commitment to sustainability. Leading
European, U.S., and Asian institutional investors use these benchmarks in selecting investment targets. We haveparticipated in the GRESB Real Estate Assessment since 2018 and have acquired “Green Star,” which is given
based on evaluation of the management component, which evaluates policies and organizational structure for
ESG promotion, and the performance component, which assesses environmental performance and tenant
engagement of properties owned, for six consecutive years. We were also selected as “Sector Leader” in the Asian
Hotel Sector for four consecutive years since 2020.

•

SMBC Environmental Assessment Loan. The SMBC Environmental Assessment Loan is a loan provided by
Sumitomo Mitsui Banking Corporation based on environmental assessment conducted by the Japan ResearchInstitute, Limited, which reviews the borrower’s environmental management comprehensively based on four
criteria: (i) awareness of environmental load; (ii) extent of environmental conservation measures and results; (iii)
its environmental management system; and (iv) initiatives for environmental communication and environmental
business. We received an “A” grade under the SMBC Environmental Assessment in March 2018.

•

Task Force on Climate-related Financial Disclosures (“TCFD”): The TCFD was established by the Financial
Stability Board (FSB) to develop recommendations for more effective climate-related disclosures. In November
2021, the Asset Manager expressed support for the TCFD recommendations, which are designed to help
companies provide better information to support informed capital allocation, and joined the TCFD Consortium,
an organization comprised of Japanese companies that support the recommendations and discuss initiatives aimed
at effective information disclosure by companies and linking of disclosed information to appropriate investment
decisions by financial institutions. In August 2022, we disclosed the initiatives for the four disclosure themes
recommended by the TCFD, including the degree of financial impact based on climate change-related scenario
analysis.

•

Tracking of environmental performance data. The Asset Manager tracks and monitors data on energy
consumption, CO2 emissions, water use and generated waste of our HMJ Group hotels.

April 2017 –March 2018(base year)

April 2020 –March 2021

April 2021 –March 2022

April 2022 –March 2023

m2

675,134.95

774,639.82

771,421.17

766,980.61

%

100.0

100.0

100.0

100.0

MWh

272,863

191,943

215,826

248,349

MWh/m20.40430.24780.27980.3238

MWh

－

－

－

7,669

Data
coverage
ratio

%

100.0

100.0

100.0

100.0

EmissionstCO2

91,28662,253

68,63374,933Emissions
intensity

tCO2/m2

0.13530.08040.08900.0977

Reduction
ratecompared tobase year

%

－

40.6

34.2

27.8

Data
coverage
ratio

%

100.0

100.0

100.0

100.0

Usage

thousand
m3

2,683

1,364

1,570

2,175

Emissions
intensity

thousandm3/m3

0.00400.00180.00200.0028Data
coverage
ratio

%

54.4

67.8

71.0

71.4

Emissions

t

3,743

3,111

3,179

4,461

Emissions
intensity

t/m2

0.01020.00590.00580.0081

Unit
Total floor areaDatacoverage
ratio
EnergyUsage
Emissions
intensity

Renewableenergyincluded
above

CO2

Water

Waste

Usage

Recycled
Amount

t

1,095

1,197

1,217

Recycle
Ratio

%

29.3

38.5

38.3

Independent Third-Party
Assurance Report－－

Verification
obtained

Verification
obtained

1,550
34.7
Verification
to beobtained

Note 1The data coverage ratio represents the proportion of the total floor space of properties for which data
could be obtained compared to the total floor space of properties owned during the subject period. The
floor space of properties acquired or sold during the subject period is calculated based on the
proportionally distributed floor space corresponding to the properties owned.

Note 2

Properties owned by JHR are managed by hotel lessees, etc. and the above data is based on the data
provided by hotel lessees, etc.

Note 3

Amount of CO2 emissions are calculated based on "Institution of calculation, reporting and disclosureof amount of emissions by greenhouse effect gas" established by Ministry of the Environment.

Note 4

Numbers may change due to revision of aggregation method.

Note 5The data for waste for the base year is a reference value compiled by the Asset Manager.

Principal Adverse Impacts

Does Japan Hotel REIT Investment Corporation take into account principal adverse impacts on sustainability
factors?
We collect on an ongoing basis select information on our existing portfolio regarding the principal adverse
impact indicators, including exposure to fossil fuels through investment assets, exposure to energy-inefficientinvestment assets and GHG emission intensity. We aim to manage the risk connected to principal adverse impacts
from our investment decisions in several ways, including general screening criteria and due diligence.
•

Exposure to fossil fuels through assets. We do not invest in real estate assets involved in the extraction,
storage, transport or manufacture of fossil fuels.

•

Exposure to energy-inefficient investment assets. We consider properties other than the properties that havereceived any of the green building certifications to be energy-inefficient. As described in more detail above,
we implement as appropriate measures to reduce the environmental impact of these properties and believe
such engagement leads the acquisition of environmental certifications.

•

GHG emission intensity. Total GHG emissions generated by properties owned were 91,286 t-CO2 (in2017), 62,253 t-CO2 (in 2020), 68,633 t-CO2 (in 2021) and 74,933 t-CO2 (in 2022). We aim to reduce
GHG emission by 30% per floor area in our portfolio（GHG emissions intensity）compared to FY2017
until 2050 as a long term target.

We consider, both at the entity-level (i.e., the Asset Manager) and at the fund-level (i.e., Japan Hotel REIT
Investment Corporation), principal adverse impacts of our investment decisions on sustainability factors. Under theInvestment Trust Act of Japan, Japan Hotel REIT Investment Corporation is prohibited from having any employees
and is required to outsource asset management to a third party. Accordingly, as discussed in detail elsewhere, any
consideration at the fund-level of principal adverse impacts of our investment decisions on sustainability is principally
conducted by the Asset Manager, subject to approval of our Board of Directors. In addition to the Asset Manager’s
contractual obligations to Japan Hotel REIT Investment Corporation under the asset management agreement, theFinancial Instruments and Exchange Act of Japan provides that the Asset Manager owes Japan Hotel REIT Investment
Corporation a fiduciary duty in conducting its activities, including making investment decisions informed bysustainability considerations.
We believe that investment decisions that negatively affect climate or other environment-related resources,or have negative implications for society, can have a significant impact to risk and value creation for our unitholders.
To this end, we consider the principal adverse impacts of our investment decisions on the above sustainability factors
throughout all major steps of the investment decision and management process throughout the lifecycle of theproperties in our portfolio.
Investment Strategy
What investment strategy does Japan Hotel REIT Investment Corporation follow?
We are a J-REIT that specializes in investment in hotels. Our basic investment thesis is to achieve steady
growth and stable revenue over the medium to long term. We aim to maximize unitholder value by acquiring highly
competitive hotels in areas with strong demand from both domestic and inbound leisure customers.
We issue green bonds and enter into green loans (collectively “Green Finance”) that take into consideration
ESG factors using our Green Finance Framework as follows.
•

Green Finance Framework. In January 2024, JHR formulated the Framework, which obtained the highest
Overall Evaluation of Green 1 (F) from the Japan Credit Rating Agency, Ltd. (“JCR”), in accordance with
the Green Bond Principles (2021) established by the Green Bond Principles and Social Bond Principles
Executive Committee, a private organization with the International Capital Markets Association (“ICMA”),
the Green Loan Principles (2023) established by the Loan Market Association (“LMA”), the Asia Pacific
Loan Market Association (“APLMA”), and the Loan Syndications and Trading Association (“LSTA”), theGreen Bond Guidelines (2022) formulated and published by the Ministry of the Environment of Japan in
March 2017 and revised in March 2020 and July 2022, and Green Loan Guidelines (2022) formulated andpublished by the Ministry of the Environment of Japan in March 2020 and revised in July 2022.
(Note) Information about the former Green Bond Framework that applies to the green bonds issued prior
to the Green Finance Framework can be found on our website: [Green Finance｜ESG｜Japan Hotel
REIT Investment Corporation (jhrth.co.jp/en)]•

Use of Proceeds. Under this Framework JHR will allocate the funds procured through the Green Finance tothe following three purposes that meet the Eligibility Criteria described below: (i) for the acquisition of green
buildings or refinancing of the funds used for the acquisition, (ii) for renovation work, and (iii) for theacquisition or installation of renewable energy generation equipment.
<Eligibility Criteria>(i) Green building
Properties that have obtained or renewed certification from any of the following third-party certification
organizations or properties that intend to obtain or renew such certification:o DBJ Green Building Certification : 3-star, 4-star or 5-star ratingso CASBEE

Certification(including Municipal CASBEE): B+, A, or S rank

o BELS Certificationo LEED Certificationo BREEAM Certification(ii) Renovation work

: 3-star, 4-star or 5-star ratings (based on FY2016): Silver, Gold, or Platinum: Very good, Excellent, or Outstanding

Renovation work that meets any of the following:o Renovation work that has the effect of reducing any of the following: CO2 emissions, energy

consumption, or water consumption by 30% in real estate owned by JHRo Renovation work intended to improve one or more stars or ranks of certification by third-party
certification organizations as defined in the above Eligibility Criteria (i)(iii) Renewable energy
Acquisition or installation of the following renewable energy power generation equipment:o Solar power generationo Onshore wind power generation (limited to equipment with output of less than 20kW)

o Biomass power generation (limited to equipment where fuel is sourced from its location or adjacentprefectures)

In order to implement initiatives continuously and systematically based on our Sustainability Policy, theAsset Manager has established the ESG Promotion Committee, which generally meets at least once every quarter, toestablish targets and measures to be undertaken, assess the progress and conduct sustainability training for officers
and employees. The Sustainability Policy will be reviewed and revised by the ESG Promotion Committee asnecessary. Any revision to the Sustainability Policy will be reported to our Board of Directors.
The ESG Promotion Committee consists of the Asset Manager’s management and officers and employeeschosen from various groups involved in promoting ESG, with the President & CEO acting as the chair and the Director& Head of Finance and Planning acting as the operating officer.
What are the binding elements of the investment strategy used to select the investments to attain each of
the E/S characteristics promoted by Japan Hotel REIT Investment Corporation?
When the Investment and Operation Committee and the Compliance Committee of the AssetManager make a decision to invest in a property (subject to the approval of the Board of Directors of theAsset Manager), findings about the property on the sustainability considerations are incorporated into theoverall investment proposal. To the extent possible, the Committees generally exclude investment proposals
with the following ESG issues: (i) the level of asbestos in the property, after removal or treatment, exceeds
the maximum level permitted under applicable environmental law; (ii) the usage and disposal of PCBcontaining machines in the property are not properly handled in accordance with relevant law; (iii) soil
contamination, after treatment, exceeds the maximum level permitted under applicable environmental law.
In addition, when we select assets for investment in connection with the Green Finance, the properties mustmeet the Eligibility Criteria. The eligible assets are evaluated and selected by the Asset Manager’s financedepartment after discussion with internal engineers, in accordance with the targets set by Asset Manager’s
ESG Promotion Committee (“Green Projects”). The Green Projects must be approved by the Asset Manager’s
Investment and Operation Committee, the Board of Directors, and JHR's Board of Directors.

What is the committed minimum rate to reduce the scope of the investments considered prior to theapplication of that investment strategy?
Prior to our investment in a property, the Asset Manager conducts due diligence review of theproperty, including the assessment of compliance with applicable environmental laws and ordinances,environmental performance and environmental and disaster risks, as well as investigation into hazardous

substances and soil contamination. We do not consider investing in properties that do not meet the standards
for soil contamination and other environmental contamination in accordance with the Air Pollution Control
Act and the Soil Contamination Countermeasures Act of Japan and other environmental laws and ordinances.
However, from time to time we acquire properties not meeting the standards as long as they are deemedfixable promptly after acquisition.
What is the policy to assess good governance practices of the investee companies and Japan Hotel REIT
Investment Corporation?
We invest directly or indirectly through trust beneficiary interests in real estate. Therefore, due
diligence (including the assessment of good governance practices) in relation to investee companies is notapplicable to us.
We, along with the Asset Manager, have introduced the following measures to assess and enhance
our governance systems:•

Initiatives to Prevent Conflicts of Interest. The Asset Manager has formulated a decision-making
process that is stricter than what is required by law. In particular, in addition to interested parties
stipulated by applicable law, the Asset Manager specifies “sponsor-related parties”, including theAsset Manager’s shareholders and their subsidiaries, which are subject to detailed standards andprocedures. Certain transactions with sponsor-related parties require a resolution of the Board of
Directors of the Asset Manager and a resolution of our Board of Directors in addition to deliberation
and approval by the Investment and Operation Committee and the Compliance Committee of theAsset Manager.

•

Risk Management. The Asset Manager has established a risk management system for the purposeof ensuring sound management and performing appropriate risk management as a financial
instruments business operator. In addition, the Asset Manager’s Board of Directors has establisheda risk management policy and strategic objectives and supervises the development of an appropriate
risk management system.

•

Internal Audit. The Asset Manager conducts annual internal audits at least once a year, in order toevaluate its risk management. Once the internal audit is completed, the compliance officer, who
serves as the chief controller of internal audit, reports the audit results to the President of the AssetManager, Compliance Committee and the audited departments. The chief controller of internal audit
also reports to the Board of Directors as necessary. The chief controller of internal audit quarterly
reviews the progress made on matters for improvement indicated by internal audits and reports theresults to the President and Compliance Committee.
(i) Impact Reporting. JHR will disclose the following information annually on its website or
through publicly available materials related to the Green Finance Framework so long as thebalance of the Green Finance remains outstanding. Reporting on green building• Property name and number of properties• Total floor area
• Type of certification• Certification rank
• CO2 emissions (t-CO2), electricity consumption (MW/h), and water consumption (m3) of all

subject properties(ii) Reporting on renovation work
• Subject project or property name
• The value or reduction rate of CO2 emissions (t-CO2), electricity consumption (MW/h), orwater consumption (m3) before and after the renovation work(iii) Reporting on renewable energy• Estimated annual power generation (t-CO2) and CO2 emission reduction (MW/h)Asset Allocation
What is the asset allocation planned for Japan Hotel REIT Investment Corporation?
We use BELS and CASBEE for the environmental certification of the properties in our portfolio. We callour property that receives any such certifications as “Green Certified Asset”. As of March 31, 2024, 16.8% of theproperties in our portfolio were Green Certified Assets, and 83.2% were noncertified assets based on gross floor area.
The percentage of Green Certified Assets in our portfolio is not high mainly due to a limited number of green
certification organization in Japan that review and issue green certifications to hotel properties. We track and monitor
the property-level environmental performance indicators of our properties leased to HMJ Group (59.9% of ourportfolio based on gross floor area) including the Green Certified Assets, to assess the environmental performance ofour portfolio. Our climate change-related targets are as follows: reduce GHG emission intensity by 30% per floor area
in our portfolio compared to FY2017 until 2050.

16.8% is #1 Aligned with E/S#1B Other E/S characteristics

Investments of JHR
83.2% qualifies as #2 Other#1 Aligned with E/S characteristics includes the investments of the financial product used to attain the environmental
or social characteristics promoted by the financial product.
The sub-category #1B Other E/S characteristics covers investments aligned with the environmental or social characteristics that
do not qualify as sustainable investments.

#2 Other includes the remaining investments of the financial product which are neither aligned with the environmental
or social characteristics, nor are qualified as sustainable investments.

How does the use of derivatives attain the environmental or social characteristics promoted by Japan Hotel REIT
Investment Corporation?
Not applicable.
To what minimum extent are sustainable investments with an environmental objective aligned with the EU
Taxonomy?
Not applicable.



Does the financial product invest in fossil gas and/or nuclear energy-related activities that comply with
the EU Taxonomy?
Not applicable. JHR does not invest in real estate assets involved in fossil gas and/or nuclear energyrelated activities.

What is the minimum share of investments in transitional and enabling activities?
Not applicable.

What is the minimum share of sustainable investments with an environmental objective that are not aligned with
the EU Taxonomy?
Not applicable.
What is the minimum share of socially sustainable investments?
Not applicable.
What investments are included under “#2 Other,” what is their purpose and are there any minimum environmental
or social safeguards?
As discussed in detail above, we invest in properties that have been subjected to ESG-related due diligence
review and risk assessment. We do not consider investing in properties that do not meet the standards forenvironmental contamination in accordance with the applicable environmental laws and ordinances, unless deemedfixable promptly after acquisition.
How will sustainable investments contribute to a sustainable objective and not significantly harm any othersustainable investment objectives?
There are no assets specifically earmarked as having a sustainable objective and as such, no calculation isrequired to be made as to whether any individual asset does significant harm to any sustainable investment objective
as referred to in the SFDR. Nevertheless, our sustainable investment objective is consistently integrated and monitored
in the management of the assets.
We have instituted a number of initiatives, at both the portfolio level and the property level, to promote E/Scharacteristics. Such initiatives include the following.
•

Climate Change Initiatives. We monitor environmental performance, such as energy consumption, CO2
emissions and water consumption, and strive to improve continuously improve our performance. Our climatechange-related targets are as follows: reduce GHG emission intensity by 30% per floor area in our portfolio
compared to FY2017 until 2050.

•

Energy Saving Initiative. We actively promote the efficient use of energy by making capital investments in our
properties and implementing measures to conserve energy. As of December 31, 2023, we had installed LED
lighting at 46 of our properties, and had installed inverter control devices on air conditioning units at 46 of ourproperties and water-saving devices at 19 of our properties. 14 of our hotels have reduced clean water
consumption by using well water. 8 of our properties have reduced clean water consumption by reusing graywater as recycled water. We have included in our leases with HMJ Group hotels Green Lease provisions that
require our tenants to collect energy consumption data and provide them to us (19 properties, equal to 59.9% of
our portfolio based on gross floor area, as of December 31, 2023). We analyze the data provided by our tenants
and consider renovation options to improve environmental performance and optimize facilities management.

Index as Reference Benchmark
Is a specific index designated as a reference benchmark to determine whether Japan Hotel REIT Investment
Corporation is aligned with the environmental or social characteristics that it promotes?
Our investment units have been included in the Nikkei ESG-REIT index (“Nikkei Index”), which was newly
established in 2020, since its establishment. The Nikkei Index is composed of Tokyo Stock Exchange-listed J-REITs
weighted by market capitalization adjusted for ESG considerations, including GRESB ratings. The index is reviewed
annually for inclusion or exclusion every November. We use the Nikkei Index only as a reference benchmark for
performance comparison and market context purposes.
How is the reference benchmark continuously aligned with each of the environmental or social characteristics
promoted by Japan Hotel REIT Investment Corporation and with the investment strategy?
Not applicable.
How is the alignment of the investment strategy with the methodology of the index ensured on a continuous basis?
Not applicable.
How does the designated index differ from a relevant broad market index?
See above.
More Product-specific Information
Where can I find more product-specific information online?
More product-specific information can be found on the website: https://www.jhrth.co.jp/en/esg/index.html.
Note Regarding the EU Taxonomy Regulation
As set out above, we promote certain environmental characteristics.
The Asset Manager is required, under Regulation (EU) 2020/852 (the “EU Taxonomy Regulation”), todisclose whether its assets are aligned with the environmental objectives formulated in the EU Taxonomy regulation.
The EU Taxonomy Regulation is to be complemented by technical standards and screening criteria which are currently
developed. The technical screening criteria for the first two environmental objectives (climate change mitigation andclimate change adaptation) were adopted in December 2021. They apply as of January 1, 2022.
We invest in economic activities that are eligible under the EU Taxonomy Regulation in respect of climatechange mitigation and/or climate change adaptation. This means that screening criteria for these investments havebeen or will be developed. The Asset Manager expressly states that in view of the fact that the regulations are still
under development or have only recently been adopted and the fact that, as a result thereof, data on alignment of ourinvestments with these environmental objectives and climate related goals in line with EU Taxonomy Regulation are
not sufficiently available, the Asset Manager is not currently in a position to disclose on an accurate and reliable basis
to what extent our investments technically qualify as Taxonomy-aligned or “environmentally sustainable” within thespecific meaning of the EU Taxonomy Regulation. Our investments may have a positive contribution to theseenvironmental objectives and may therefore eventually be considered Taxonomy-aligned, but at this stage, the AssetManager is required to state that there is no minimum proportion of our investments that qualify as such.
The Asset Manager further states that the “do no significant harm” principle applies only to those investments
underlying the financial product that takes into account the EU criteria for environmentally sustainable economic
activities. The investments underlying the other portion of this financial product do not take into account the EU
criteria for environmentally sustainable economic activities.

INTEGRATION OF SUSTAINABILITY RISKS IN THE INVESTMENT DECISIONS, AND THE IMPACT
OF SUCH RISKS ON THE RETURNS OF JAPAN HOTEL REIT INVESTMENT CORPORATION (SFDR
ARTICLE 6 DISCLOSURE)
We have established the ESG Promotion Committee, which generally meets at least once every quarter, toestablish targets and measures to be undertaken, assess the progress and conduct sustainability training for officers
and employees. The ESG Promotion Committee consists of the Asset Manager’s management and officers andemployees chosen from various groups involved in promoting ESG, with the President & CEO acting as the chair andthe Board Director & Head of Finance and Planning acting as the operating officer.
Under this organizational structure, we have instituted a number of initiatives to promote E/S characteristics.
Such initiatives include climate change initiatives, initiatives for saving/reducing energy consumption, local
community initiatives, and initiatives for employees’/tenant’s initiatives.
In order to conduct sustainable asset management while maximizing the value of our properties, we havetaken into consideration ESG factors in our investment and asset management processes. In addition, we haveestablished the Green Finance Framework in relation to fund procurement as described in more detail above. Our
Sustainability Policy clearly states that we consider the environment and stakeholders such as members of local
communities surrounding our properties, and we request our hotel tenants to cooperate with our sustainability
initiatives. We consider environmental and social factors when procuring products and services.
While sustainability issues will severely impact our business activities, we believe that such issues may also
become potential business opportunities to create new value for sustainable growth. Accordingly, we position ourcommitment to sustainability as one of the top priorities in our management strategies. We also believe that integrating
sustainability factors alongside traditional financial and operational metrics in our investment decision process helps
us make a more holistic assessment of a property’s risks and opportunities and is commensurate with the pursuit ofsuperior risk-adjusted returns. In other words, we believe that if we fail to consider ESG factors enough in theinvestment decision-making process, it may cause the increase of capital cost and even reduce investors’ returns. If
our ESG initiatives are not sufficient, our investment units may be excluded from ESG stock indices or may be
excluded from investment by investors who use the status of ESG initiatives as one of their investment criteria. As aresult, the investment unit price may be adversely affected. We are exposed to the following risks in particular.
Transition risks and Physical risks
In order to examine the impact of climate-related risks and opportunities on the JHR's business, strategy andfinancial plan, we conducted scenario analysis using the 4℃ and 1.5℃ scenarios. In the scenario analysis, we refer tothe Fifth Assessment Report published by the IPCC (Intergovernmental Panel on Climate Change of the United
Nations) and World Energy Outlook 2020 published by the IEA (International Energy Agency) to analyze the impact
on JHR's business by measures such as Japanese government's "Carbon Neutral Declaration" in mind for the transitionof the social economy to decarbonization and the increasingly serious and frequent occurrence of natural disasters dueto the progress of climate change.
Scenario
4℃ Scenarios
1.5℃ Scenarios

Transition risk
STEPS (IEA WEO2020)
NZE2050 (IEA WEO2020)

Physical risk
RCP8.5 (IPCC Fifth Assessment Report)
RCP2.6 (IPCC Fifth Assessment Report)

For each of the above 4℃ and 1.5℃ scenarios, we have evaluated the magnitude of the financial impacts on
JHR which will be caused by the identified risks and opportunities. For each scenario, we evaluated the impact in theyears 2025 (short-term), 2030 (medium-term) and 2050 (long-term) on a scale of large, medium and small. The
accuracy of this assessment is not guaranteed, as it is a relative impact assessed based on a qualitative analysis andincludes various factors such as uncertain assumptions and unknown risks over the medium to long term. A summaryof the results is shown in the table below.

Financial Impact
Category

Risk and
Opportunity
Factors

4℃

ChangesClassifiShort- Midcation
Term Term

1.5℃
Long- Short- MidTerm Term Term

LongTerm

Initiatives
andCountermeasures

Transition Risks

Policy and
Legal

Strengthening
taxation on
GHGemissionsthrough theintroduction ofa carbon tax

Increase in tax
burden on GHG
emissions fromproperties undermanagement

Risks

Minor Minor Minor Minor

ModeMajor
rate

Expansion andmandate oflabeling
systems related
to energy
efficiency andsustainability
initiatives forbuildings

Rise in expenseof acquiring
environmental
certification

Risks

Minor Minor Minor Minor

Mode- Moderate
rate

Increase in
expenses for
introducing newtechnology forequipment inproperties undermanagement

Risks

Minor Minor Minor Minor Minor

Evolution anddiffusion ofrenewable
Technology
energy andenergy-saving
technologies

Marketand
Reputation

Changes in theinvestment
attitude andinvestment andfinancingdecisions ofmarketparticipants

Reduction ofutility costs
through theintroduction andOpporreplacement oftunities
equipment withhigh energysaving
performance
Deterioration offinancingconditions andincrease infinancing costs
due to delay inresponse to
climate change

Minor Minor Minor Minor

Moderate

Mode- Moderate
rate• Switch to equipmentwith superior
environmental
performance• Consider
introduction ofrenewable energy• Third-party
verification of
aggregatedenvironment data
(energy, GHG,
water and waste)• Survey the latest

technology andestimate the effectby introducing
equipment with thelatest technology• Introduce watersaving devices,
reduce sewage andwastewater byintroducing ECOcleaning, and use
LED lights• Disclose
Risks

Increase funding
volume andlower funding
Opporcosts bytunities
responding toand appealing toinvestors whoare concerned

Minor Minor Minor Minor Minor

Minor Minor Minor Minor

Moderate

Mode- Moderate
rate

information with
ESG disclosure
framework (TCFD,etc.). Set targets andimplement
initiatives in linewith government
policies• Consider
introduction ofrenewable energy• Promote energy
saving throughperiodic facility
renovations andaboutenvironmental
issuesDecrease in rents
due to increased
costs forresponding to thedemands of hotel
lessees, etc. and Risks
hotel users(guests) anddeterioration of
reputations due
to non-response

Minor Minor Minor Minor Minor

Increase market
recognition andOppormarket
competitiveness tunities
as an ecofriendly property

Minor Minor Minor Minor

Damage topropertycaused bytyphoons andother winddamageIncrease in repair
and insurance
costs, loss of
Risks
sales
opportunities
and lower
occupancy rates

Minor Minor

Floods of
nearby rivers
and rainfall
inundation
caused bytorrential rains,
etc.

Increase in repair
and insurance
costs, loss of
Risks
sales
opportunities
and lower
occupancy rates

Minor Minor

ModeMinor Minor Minor
rate

Increase indemand for air
conditioning
due to increasein extreme
weather
conditions suchas extremely
hot and cold
weather

Increase inutility costs, aswell asRisks
maintenance andrepair costs

Minor Minor

ModeMinor Minor Minor
rate

Change indemand fromhotel lessees
and hotel
guests(avoidingproperties thatare lessclimateresponsive)

Moderate

conduct tenantsatisfaction surveys• Obtainenvironmental
certifications(SMBC ecocertification, BELS
and CASBEE)• Issue green bondsand enter into green
loans, etc.

Mode- Moderate
rate

Physical Risks

Acute

Chronic

ModeMinor Minor Minor
rate• Check hazard maps
• Prepare BCP

manuals, andconduct disastertraining• Mitigate damage bystrengthening
facilities• Promote energy

savings throughfacility renovation

The definitions of “transition risks” and “physical risks” are as follows:“Transition risks”: Business impacts arising from the economy’s transition to a low-carbon, decarbonized economy- Policy and Legal Risks : Risks arising from the tightening of policies and regulations to promote decarbonization- Technology risks: Risks associated with the development of new low-carbon and decarbonization technologies
and their widespread adoption- Market risks: Risks related to markets, such as energy price volatility and changes in demand for services- Reputational risks: Risks associated with a deterioration of reputation among stakeholders, including customers,
the public, employees and investors“Physical risks”: Business impacts resulting from climate change and shifts from traditional climate patterns and phenomena- Acute physical risks: Risks arising from sudden weather phenomena such as typhoons and floods- Chronic physical risks : Risks arising from long-term changes in climate patterns that may cause rising sea levels or
chronic heat waves

Social and governance risks
We are exposed to the risk that any of our hotels will become subject to a serious public criticism regarding
any social or governance aspect of the hotel that makes our holding of the hotel inconsistent with our ESG policy. Weview this risk as a low-level risk because we test each of our hotels against our ESG policy on an ongoing basis and,in case of non-compliance with our ESG policy, promptly take measures to rectify the non-compliance upon
consultation with independent experts as necessary.